Government Considers Tax Relief for Salaried Individuals in Upcoming Budget

The federal government is considering easing the tax burden on salaried individuals in the next budget after their income tax contributions surged to PKR 285 billion in the first seven months of the current fiscal year—an increase of Rs.100 billion compared to the same period last year.

State Minister for Finance Ali Pervaiz Malik, speaking at a seminar on business reforms, acknowledged that the taxation on salaried individuals had exceeded their capacity to pay. He noted that despite Prime Minister Shehbaz Sharif’s reluctance, the government imposed an additional PKR 75 billion tax burden on this segment in the last budget under pressure from the International Monetary Fund (IMF). However, with five months remaining in the fiscal year, the revenue collected from salaried taxpayers has already surpassed that amount.

The breakdown of contributions shows that:

• Non-corporate sector employees paid PKR122 billion, a 41% increase from last year.
• Corporate sector employees contributed PKR 86 billion, up 50%.
• Provincial government employees paid PKR 48 billion, nearly double the previous figure.
• Federal government employees contributed PKR 29 billion, reflecting a 63% surge.

Despite this heavy taxation, wholesalers and traders continue to evade the tax net. Instead of directly enforcing taxation on them, authorities rely on at-source deductions from non-registered traders as a benchmark for compliance.

The government is now weighing options to provide relief to salaried individuals in the upcoming federal budget, addressing concerns that they are bearing a disproportionate share of the country’s tax revenue. However, whether this relief will materialize remains to be seen.